Just to add a quick data point - I did this exact withdrawal last year. My daughter had about $32,000 in scholarships during college, and we had about $47,000 left in her 529. I withdrew $32,000 and only paid tax on the earnings portion (no penalty). Make sure you get form 1099-Q from your 529 administrator in January after you make the withdrawal. That form will show how much of your withdrawal was earnings vs. principal. Only the earnings are taxable.

This is such great information! I'm in a very similar situation with my son who graduated in 2021 with significant merit aid. I've been hesitant to touch the leftover 529 funds because I wasn't sure about the tax implications. One thing I want to add for anyone considering this - make sure you have really good documentation of ALL scholarship amounts. I learned this the hard way when I was gathering paperwork. Some of my son's scholarships were applied directly to his account by the school, and I had to go back and request detailed statements showing exactly how much was awarded each semester. Also, if your child had any grants (Pell grants, state grants, etc.) in addition to merit scholarships, those count toward the penalty-free withdrawal amount too. I almost missed including a $3,000 state grant that would have reduced my penalty-free withdrawal calculation. The peace of mind of getting that money out penalty-free is definitely worth the paperwork effort!

I've seen dozens of cases like this at the VITA site where I volunteer. The verification letter system has a serious flaw - the IRS computer system marks letters as "sent" when they're queued for printing, not when they actually go out. During busy periods (especially February-April), there can be a 2-3 week gap between when the system says a letter was sent and when it actually gets printed and mailed. To make matters worse, these verification letters are often generated by automated systems that don't check if previous letters were delivered. So when you call, the representative sees the letter marked as "sent" in their system, assumes you should have received it, and triggers a new one - which enters the same backlogged printing queue. We've had taxpayers receive 4-5 identical verification letters all at once in May for returns filed in February. The system is fundamentally broken.

This is incredibly frustrating but unfortunately very common right now. I went through the exact same cycle - called three times, each time told to wait 14 more days, never received a single letter despite them claiming multiple were "sent." What finally worked for me was booking an appointment at my local Taxpayer Assistance Center through the IRS website. I was able to get an appointment within 10 days, brought two forms of ID, and they verified my identity on the spot. My refund was processed and deposited within a week after that. The phone verification system seems completely broken this year. Don't waste more time calling - go straight to the in-person appointment option. It's the only reliable way I've seen people actually resolve this verification nightmare.

One thing nobody's mentioned yet - make sure to check what fees your bank might charge for closing the CD early! My bank hit me with a $75 early termination fee plus I lost 3 months of interest when I did this last year. It wasn't a tax issue but still painful. Also make sure Fidelity isn't going to charge you a fee to receive the funds. Some places have transfer fees for smaller accounts.

Great discussion here! Just to add some clarity on the terminology - what your credit union is suggesting is indeed a "60-day rollover" which can be non-taxable, but it does come with risks that others have mentioned. However, I want to emphasize what Anastasia said about letting Fidelity initiate the transfer. This is called a "direct trustee-to-trustee transfer" and it's almost always the safer route. Even with CDs, most brokerages have standard procedures for this. Here's what I'd recommend: Call Fidelity back and specifically ask to speak with their IRA transfer department. Tell them you want to do a "direct trustee-to-trustee transfer of a Roth CD IRA" and ask if they have a form that includes liquidation instructions. Most major brokerages deal with CD transfers regularly and have streamlined processes. If for some reason Fidelity truly can't do a direct transfer, then yes, the 60-day rollover your bank suggested will work, but make sure you: 1. Get written confirmation from your bank that they'll report it as a rollover, not an early distribution 2. Complete the deposit to Fidelity within 60 days of receiving the funds 3. Keep all documentation for your tax records The direct transfer route eliminates the timing risk and doesn't count against your one-rollover-per-year limit.

Just to add another perspective - I'm a convenience store owner who deals with lots of cash. Form 8300 is really meant for large cash transactions that might be suspicious. The IRS and FinCEN are looking for potential money laundering, not legitimate small business income. For your freelance work, what matters more is: 1. Keeping good records (which you're doing with your spreadsheet) 2. Reporting all income on your tax return (Schedule C) 3. Making estimated tax payments (which you're also doing) The Form 8300 requirement is really aimed at detecting large cash transactions like someone buying a car with $15k in cash, not multiple small legitimate transactions from different people.

WARNING: One thing nobody has mentioned yet is that even if Form 8300 doesn't apply, banks are still required to file Suspicious Activity Reports if they think you're depositing cash in a way that seems designed to avoid reporting requirements. If you deposit $9,999 in cash, that looks very suspicious. Even making regular cash deposits that seem timed specifically to stay under $10k could potentially raise flags. I'd recommend being very transparent with your bank about the source of your cash income. Maybe even talk to a bank manager to explain your business so they understand why you're making regular cash deposits.

For what it's worth, the software I use (TurboTax) asks for 9 digits but lets me proceed with just 5. Most tax software is designed this way - they ask for complete info but don't actually block you from continuing with just the standard ZIP. Just try clicking "continue" or whatever and see if it lets you move forward.

Don't stress about this at all! I went through the exact same panic when I first started filing my own taxes. The 5-digit zipcode is absolutely fine - I've been using just the regular zipcode for years without any issues. Most tax software asks for the full 9 digits because they're trying to be thorough, but the IRS processes millions of returns with just 5-digit zipcodes every year. Your return won't be rejected, delayed, or flagged for audit because of this. If your software absolutely requires 9 digits (which is rare), you can safely put 0000 for the last four digits, or look up your actual +4 on the USPS website if you want to be extra careful. But honestly, you're overthinking this - it's one of those details that feels scary when you're doing taxes for the first time but is actually no big deal at all. You've got this! The fact that you're being careful and asking questions shows you're already on the right track.